The fault stems from the drive which is said to be defectively designed by plaintiffs filing ongoing legal cases in the U.S. District Court in Seattle, because tilting or swiveling the video game console can scratch game discs playing inside.
While most of the court declarations are sealed, a newly unsealed motion has uncovered information about Microsoft's recognition of the the disc reorientating while playing in the console.
Hiroo Umeno, a Microsoft program manager, said in a declaration, "This is ... information that we as a team, optical disc drive team, knew about. When we first discovered the problem in September or October (2005), when we got a first report of disc movement, we knew this is what's causing the problem."
The declaration continues that after the Xbox 360 launch, Microsoft sent a team of engineers to stores across the country "to investigate complaints that the Xbox 360 was routinely scratching discs during demonstrations."
The motion also mentions Microsoft determined that the deep gouges or disc scratching was caused with discs becoming "unchucked" and colliding with the drive's optical pickup unit, and that Microsoft considered possible ways to fix the problem but in the end rejected all of them.
Microsoft did eventually institute an Xbox 360 disc replacement program that sends out new discs to customers if their discs are damaged for any reason. The program only applies to Microsoft titles and costs $20 per disc. According to Microsoft employee in the motion more then 55,000 customers have complained about broken discs.
Despite this potentially alarming information A Microsoft spokesman responded to the filing today by saying the disc scratching issue was not unique to the Xbox 360.
"Xbox 360 is designed so that it will not damage a game disc as long as the console is not moved while the disc is spinning," he said. "Too much movement of any game console, not just Xbox 360, can cause scratches on a disc. That's why we put a warning on the face of the disc tray, which the user has to physically remove before the initial use of the system. We also have warnings posted online and in hard copy instruction manuals."
The spokesman also said the 55,000 contacts the company has had represent a tiny percentage of the Xbox 360's in the market.
"While we have had some users contact us with concerns about scratched discs, it is less than one-half of 1% of the total Xbox 360 user base," he said.

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